Notice of Approval – TSX Closing Price, TSX Last Ask Price, TSX Last Bid Price – TSX Inc.

Market Regulation Document Type
TMX Group Limited and TSX Inc. rule review and notices

TSX CLOSING PRICE, TSX LAST ASK PRICE, TSX LAST BID PRICE

In accordance with the Process for the Review and Approval of the Information Contained in Form 21-101F1 and the Exhibits Thereto, the Ontario Securities Commission has approved amendments to the TSX Inc. ("TSX") Rule Book to add the definitions for TSX Last Ask Price, TSX Last Bid Price, and TSX Closing Price,

Summary of the Amendments

TSX will be amending the TSX Rule Book by adding three new definitions to Rule 1-101 as follows: TSX Last Ask Price ("TSX Ask"), TSX Last Bid Price ("TSX Bid"), and TSX Closing Price ("TSX Closing Price"), (together, the "Amendments"). The Amendments will provide market participants with better and more indicative reference points for Exchange Traded Funds ("ETFs") and listed securities and meaningfully improve valuations helping reduce investor confusion.

Comments Received

The Amendments were published for comment on June 19, 2021, and five (5) comment letters were received. A summary of the comments submitted, together with TSX's responses, is attached as Appendix A. TSX thanks the commenters for their feedback.

Effective Date

The Amendments will be implemented and available on September 27, 2021, subject to stakeholder feedback and industry readiness and feedback.

 

APPENDIX A

Summary of Comments and Responses

List of Commenters:

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Jack Rando, IIAC

Shalomi Abraham, Invesco

Nasdaq CXC Limited

Ed Bundy, RBC Capital Markets

Alex Perel, Scotiabank Global Banking and Markets

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Capitalized terms used and not otherwise defined in the Notice of Approval shall have the meaning in the Notice of Proposed Amendments and Request for Comments dated June 19, 2021.

Summary of Comments Received

TSX Responses

 

All five commenters were supportive of the TSX Closing Price, TSX Last Bid, and TSX Last Ask proposal ("Proposal").

TSX thanks the commenters for their input and support.

 

One commenter noted that the Proposal would provide investors with better and more indicative valuations for ETFs and listed securities and meaningfully improve valuations and help reduce investor confusion.

TSX also thanks the commenters and industry participants for their time in collaborating with TSX on this proposal.

 

Another commenter added that the Proposal will move the industry closer to addressing long-standing valuation/reporting issues experienced by market participants in relation to these securities.

 

 

Another commenter noted that the dissemination of the proposed data elements through changes to existing market data feeds, rather than through a zero-volume trade or FTP site, will greatly increase the range of downstream users that could take advantage of these calculated valuations.

 

 

Three commenters noted that the value of the calculations would be improved if they were based on the consolidated market quotations and not just the TSX BBO.

TSX thanks the commenters for their input and suggestions.

 

One of these commenters suggested that TSX explore with other marketplaces the possibility of including away quotes in the calculations.

TSX continually evaluates its broad offering of products to ensure that it consistently offers market participants options that offer value and reflect market needs. As with our normal process, any changes will involve industry consultation, may require regulatory approval, and appropriate notice will be given.

 

Another commenter suggested that marketplaces contributing to the NBBO allow TSX to use their data for this purpose at no incremental cost. The commenter added that TSX should also provide their data for similar calculations at other listing markets should those needs arise in the future.

 

 

Another commenter suggested that the use of consolidated data be made a condition for approval as the creation of accurate reference last sale information is a matter of investor protection and market efficiency.

 

 

Two commenters suggested that all other Canadian listing exchanges also adopt similar methodologies for closing prices.

TSX thanks the commenters for their input and suggestions. We will continue to engage with industry participants on these suggestions.

 

Three commenters suggested that the industry work together to settle on one single set of harmonized rules for derived closing valuations. These commenters noted the difference in the Proposal versus the solution currently being used by another Canadian marketplace which utilizes the last 15 minutes of trading.

TSX continually evaluates its broad offering of products to ensure that it consistently offers market participants options that offer value and reflect market needs. As with our normal process, any changes will involve industry consultation, may require regulatory approval, and appropriate notice will be given.

 

Two of these three commenters encouraged TSX and the other Canadian marketplace that currently offers derived closing valuations to adopt the same TWAP time period for their respective calculations.

 

 

All five commenters suggested that the Proposal be extended to also include all thinly-traded securities in Canada.

TSX thanks the commenters for their input and suggestions.

 

One commenter added that Canadian preferred shares, convertible debt instruments and smallcap equities would all benefit from this approach.

TSX continually evaluates its broad offering of products to ensure that it consistently offers market participants options that offer value and reflect market needs. TSX will explore extending the Proposal to additional securities in the future.

 

One of the commenters noted that some thinly traded securities may be holdings of ETFs so there is added value in being consistent with the two approaches.

As with our normal process, any changes will involve industry consultation, may require regulatory approval, and appropriate notice will be given.

 

One commenter suggested that the methodology can be refined by consistently representing the TSX Bid and TSX Ask for ETFs and stocks, with a common methodology. The purpose of averaging the BBO over the final 10 minutes of trading is to overcome data quality issues, particularly in cases where a security is thinly-traded. The same data integrity concerns are lessened when price discovery occurs in the market.

TSX thanks the commenter for the suggestion.

 

The commenter suggested that:

TSX continually evaluates its broad offering of products to ensure that it consistently offers market participants options that offer value and reflect market needs. As with our normal process, any changes will involve industry consultation, may require regulatory approval, and appropriate notice will be given.

• In situations where a security has not traded in the last 10 minutes of regular market hours, the BBO is represented as the 10-minute TWAP of the displayed bid and offer respectively. This is the methodology currently proposed for all ETFs.

 

• In cases where a trade has occurred in the final 10 minutes, the closing BBO is observed immediately after the last board lot trade has taken place, including in the closing auction. This approach would capture the market impact of the last execution of the day, including the impact of the closing auction. In the case of frequently-traded securities, and all securities where a closing auction has taken place, it would be functionally equivalent to the closing price snapshot at 4:00 PM currently proposed for common stocks.

 

 

Two commenters noted that regulatory changes are needed so that stakeholders are permitted to use calculated prices/quotations beyond indicative valuations so that they can be incorporated into other official uses.

TSX thanks the commenters for their suggestions.

 

One of the commenters specifically referred to the codification of valuation approach in IIROC Dealer Member Rule 200 and Form 1 and asked that IIROC, in collaboration with the CSA, investigate suitable amendments to the Dealer Member Rules to permit dealers to use derived valuations.

TSX would welcome the opportunity to work with IIROC, CSA and other industry participants in pursuing suitable amendments to the Dealer Member Rules to permit dealers to use derived valuations.

 

One commenter noted that the Proposal does not consider situations where the last board lot may have traded on a different venue than that of the TSX.

TSX thanks the commenter for their input.

 

 

TSX continually evaluates its broad offering of products to ensure that it consistently offers market participants options that offer value and reflect market needs. As with our normal process, any changes will involve industry consultation, may require regulatory approval, and appropriate notice will be given.